Type 2 diabetes mellitus (T2DM) is caused by insulin resistance (IR) and inadequate insulin secretion. T2DM affects one in five Americans over age 60 and has been associated with verbal memory deficits in older patients. These deficits are consistent with growing evidence that insulin contributes to the functioning of the hippocampus and adjoining medial temporal structures supporting memory. Furthermore, the hypothalamic-pituitary-adrenal (HPA) axis, commonly dysregulated in insulin resistant persons, interacts with the hippocampus and may influence memory. Therefore, IR may contribute to T2DM-related memory impairment. The proposed studies will examine the effects of improving IR on central nervous system (CNS) functions in T2DM and impaired glucose tolerance (IGT). Three hypotheses will be tested: that improving insulin sensitivity will (1) enhance memory and other cognitive functions, (2) increase cerebral glucose metabolism in the hippocampus and adjoining medial temporal structures, and (3) normalize cerebrospinal fluid (CSF) levels of insulin and the CSF-to-plasma insulin ratio. We will also characterize the effects of improving IR on plasma and CSF levels of amyloid peptides, which are regulated in part by circulating insulin. In a Core Study, newly diagnosed persons with T2DM and IGT will be randomized to receive the insulin sensitizer rosiglitazone (4 mg bid), the insulin secretagogue nateglinide (120 mg tid), or placebo for 16 weeks. Cognitive measures and blood samples for neuroendocrine assays will be obtained at baseline, treatment weeks 8 and 16, and after 8 weeks of washout. It is predicted that both agents will enhance memory, and that rosiglitazone will produce a greater degree of enhancement than nateglinide. A subset of Core Study subjects will receive either positron emission tomography (PET) imaging or lumbar puncture (LP) to obtain CSF at baseline and treatment week 16. In addition, a healthy control group will receive only baseline PETs or LPs. Significant findings will provide converging evidence that JR can adversely influence various CNS functions and suggest that an important therapeutic goal in IGT and T2DM is to improve insulin sensitivity. Furthermore, results of these studies should point to new avenues of research, such as examination of the cellular effects of IR on cerebral glucose metabolism and their relationship to cognition. Finally, these studies have the potential to elucidate relationships between T2DM and other disorders in which memory is impaired, such as Alzheimer?s disease.